During the UK lockdown Allegra World Coffee Portal conducted two major surveys to assess how the UK public and coffee shops have been impacted by and responded to Covid-19. As the UK café industry begins the long road to recovery, 5THWAVE examined both studies in-depth and spoke with UK coffee leaders currently navigating the crisis to assess how cafés can find the way forward in a Covid-19 world.

​Regent Street in central London, one of the UK’s busiest shopping destinations, lies deserted in April 2020 | Photo: Joe Stubbs

Covid-19 has been devastating for the UK. At the time of writing over 8% of recorded deaths worldwide, more than 43,000, have occurred in England, Wales, Scotland and Northern Ireland, collectively the highest number of mortalities among European nations. Meanwhile, the OECD is forecasting an 11.5% slump in UK GDP for 2020 as a result of Covid-19 disruption.For the UK’s hospitality businesses forced to close on 23 March 2020, lockdown has been brutal. As bustling high streets paled into ghostly avenues, dwindling footfall and store closures wiped out revenues for many. But even before Covid-19 caused unprecedented upheaval across the global economy, UK coffee shops were already enduring significant trading pressures.

“Pre-pandemic we were at the most competitive time in history for coffee shops in London”
– James Hoffmann, Co-founder, Square Mile Coffee Roasters 
Over the last 18 months, industry leaders have consistently cited Brexit, with its ramifications on hospitality workers and dampened consumer confidence, as a major headwind. Reflecting the increasingly parsimonious trading environment, The British Retail Consortium and KPMG recorded total retail sales growth of just 0.1% in 2019 – the lowest since records began in 1995. With rising property, staff costs and growing competition, particularly in urban areas, profit margins for many cafés were already wafer thin.

“Pre-pandemic we were at the most competitive time in history for coffee shops in London,” says James Hoffmann, a coffee expert and co-founder of Square Mile Coffee Roasters. “It was never harder to make money doing it and margins never mattered more.”

The lay of the land

In April 2020, Allegra World Coffee Portal conducted a survey of 4,000 people to assess the personal, social and financial toll of the pandemic in the UK. The Covid-19 Impact on the UK Population Survey revealed a nation grappling with increased anxiety, job insecurity, and separation from loved ones.

The following month, Allegra partnered with Alpro to interview more than 220 UK café operators on their experiences during the pandemic. Findings from The Impact of Covid-19 on Cafés and Coffee Shops were stark. Less than seven weeks into lockdown 93% of operators surveyed were accessing the government’s furlough job retention scheme, 80% had temporarily closed all or most venues and 46% measured the financial impact of lockdown at £50,000 or more.

Closed businesses on an empty high street in Leeds, UK | Photo: Gary Butterfield

The outbreak of Covid-19 has prompted state economic intervention not seen since the Second World War, with governments around the world scrambling to inject trillions of dollars into beleaguered economies. On 17 March 2020, the UK government unveiled an historic £350bn economic support package of business grants, loans, tax deferrals and eviction protection for Covid-19-hit businesses.

While the UK’s handling of the pandemic, particularly its public health response, has drawn mixed appraisal, a majority of café owners surveyed by Allegra in May 2020 (66%) indicated they were satisfied with government’s support for businesses during the crisis.

“The furlough scheme was great support for hospitality businesses and helped us carry our team through the crisis,” says Marta Pogroszewska, Managing Director of Gail’s, a boutique bakery and coffee chain with around 60 stores in the UK. “Now we are re-opening, our teams are coming back to work and our livelihoods have been protected.”

Although the UK’s business support policies have been broadly well received, a lack of clarity on eligibility for Covid-19 loans and grants has proved a major hurdle for many.

“As a start-up it is questionable whether you are viable,” says Jamie Robertson, UK CEO of Roasting Plant, a high-tech roastery-café concept with five US stores and two in the UK. “You had to be a viable business before we went into lockdown to qualify for a business interruption loan. Roasting Plant was declined initially, but we fought it and managed to get approval. That was a huge amount of energy.”

Kings of convenience

Takeaway coffee has provided a lifeline for many cafés that stayed open during lockdown, with rapid, frictionless transactions essential for ensuring staff and customer safety. But even before social distancing became the imperative, UK consumers were already demanding more seamless transactions.

In February 2020, 53% of consumers surveyed by Allegra indicated they would be happy to use cashless-only payment in coffee shops, with 41% indicating they would be deterred by in-store queues of five or more people.

“During the first five years of the London specialty coffee boom, many cafés operated under the impression that people were willing to wait for quality and travel for it – and that was broadly true for the small number of customers sustaining those early businesses. But competition is pushing operators toward greater efficiency,” says Square Mile’s James Hoffmann.

“People like a queue of a certain length in the UK and if it is too long they will move on. The success of businesses like Pret A Manger is based on a combination of speed and quality that is absolutely good enough for customers, but a typical specialty café in the UK will still make you wait and wait for your beverage. It is stunning to me that many still do not value people’s time.”

“All of our contingency planning was based around mitigating risks and understanding what the opportunities could be”
– Marta Pogroszewska, Managing Director, Gail’s
Now, with Covid-19 making long queues part of everyday life across much of the UK, speed of service is crucial. For many coffee shops, offering convenience is no longer optional – it has become an operational necessity. For cafés already invested in pre-ordering, click & collect, and delivery, the shock of trading in a socially distanced world has been softened.

“All of our contingency planning was based around mitigating risks and understanding what the opportunities could be,” says Gail’s Pogroszewska. “We have long offered click & collect and emphasised to customers they could order everything online during the lockdown. Speed of service is really important to our customers and you can see the industry moving in that direction. Delivery has a great future in the UK, we’ve had such a positive response.”

Roasting Plant’s largely automated in-store system also proved beneficial for social distancing as it re-opened its London stores in June. The café utilises patented ‘Javabot’ pneumatic technology to dispatch coffee directly from an in-store roaster to its super-automatic espresso machines.

“We were cashless from the very beginning and our set-up means we can operate our stores with two people and do virtually the same numbers, which lowers the cost of our operation. Our speed of service means you can get a coffee within 45 seconds of ordering,” says Robertson. 

Third-party delivery services have played a major role in enabling coffee shops to reach customers at home during the pandemic | Photo: Kai Pilger


Home is where the coffee is

The UK lockdown has catalysed surging demand for delivery and at-home coffee consumption, which represent crucial revenue opportunities for operators able to pivot accordingly. Introducing delivery was among the top trading model adjustments implemented by café operators surveyed by Allegra’s café impact survey, with many predicting increased delivery demand will be a key change in consumer behaviour as a result of the crisis.

“Having a beautiful retail outlet is great, but without an e-commerce or online offering, many companies are going to get left behind”
– David Rogers, Managing Director, Lavazza UK
They could well be right. Forty-four percent of consumers surveyed in Allegra’s UK public impact survey said they had increased online grocery delivery orders during the pandemic, with 43% indicating increased use of online non-grocery delivery. Compare that to the 72% surveyed making less frequent trips to supermarkets during the pandemic, and the case for delivery and at-home coffee consumption looks even stronger.

“There has been a seismic shift from away-from-home to at-home coffee consumption during the pandemic, says David Rogers, UK Managing Director of Lavazza. “Retail sales in supermarkets rose exponentially during the early days of the lockdown in late March and early April, but have now returned to a fairly even level. But the seismic shift has been the amount of trade done on e-commerce channels.”

It is an experience that chimes with Roasting Plant’s Robertson. “We closed ahead of the government shutdown on 18 March because there had already been such a decline in footfall it did not make sense to stay open. We then pivoted to selling our coffee online and saw online sales quadruple,” he says.

Other UK coffee firms have followed a similar path. In May 2020, Nestlé joined forces with Deliveroo Essentials to launch an app-based delivery platform offering instant coffee, confectionery and soft drinks in the UK. The same month, the UK’s largest coffee chain, Coca-Cola-owned Costa Coffee, announced the expansion of its packaged coffee range across Europe.

Covid-19’s impact on at-home coffee consumption has echoed across the global coffee industry too. In April 2020, Nestlé reported its strongest quarterly sales growth in five years as coffee consumers stayed at home because of lockdowns globally. JAB Holdings-controlled Keurig Dr Pepper also reported a 6% increase in the retail consumption of its single-serve coffee pods during the same period.

“There is real danger for companies that do not have channel diversification,” says Lavazza’s Rogers. “E-commerce for retail and at-home coffee has emerged as a big winner from this disturbing era. This is absolutely critical for coffee shops – having a beautiful retail outlet is great, but without an e-commerce or online offering, many companies are going to get left behind.”

Just how far consumers’ shopping habits will be altered in the long term remains uncertain. But with operators investing significant resources in developing new delivery platforms or accelerating existing retail coffee strategies in response to Covid-19, cashless transactions, digital ordering and delivery are likely to become increasingly essential sales tools for cafés.

Social distancing could present a thorny problem for hospitality businesses wishing to resume in-store trading for some time to come | Photo: Tamara Bellis

The elephant in the room

Social distancing has presented an especially thorny challenge for UK hospitality businesses. It is unsurprising then, that some of the fiercest criticism of the UK’s two-metre policy has come from within the industry. “We need to call out the ridiculous and unjustified two-metre rule; we need to get customers back through the doors and show them they can have a great time and are not going to die of the Black Death,” wrote serial investor and founder of pub group Punch Taverns, Hugh Osmond, in June 2020.

“We need to make customers feel safe and confident they’re doing the right thing by returning to some kind of normality”
– Jamie Robertson, UK CEO Roasting Plant 
UK coffee shops reopening in July 2020 must delicately balance commercial needs with their public health obligations to ensure they are not at odds with customer wellbeing. Members of the UK public surveyed by Allegra in April 2020 cited social distancing recommendations as the UK government’s single most effective coronavirus response.

“We need to make customers feel safe and confident they’re doing the right thing by returning to some kind of normality. The economy needs to survive, so we need to take a calculated risk to ensure that we can pull everything back together,” says Roasting Plant’s Robertson.

While acknowledging the necessity of social distancing to ensure public and staff safety, Robertson is also concerned about the long-term impact on consumer psyche. Even as the two-metre rule is relaxed to ‘one-metre-plus’, months of social distancing could prove to have long-lasting behavioural ramifications.

“The fear of God has been put into the nation and it will be difficult to change that mentality. We’ve got ourselves into a bit of a muddle in the UK and to unwind it all is going to be tough.”

With UK coffee shops so reliant on footfall, these concerns could prove well founded. Seventy-two-percent of café owners surveyed by Allegra believe lower customer footfall will be the key change in customer behaviour as a result of this crisis. Compare this to the 36% of the UK public who intend to limit outdoor exposure in the long-term, and the 35% who believe they will be uncomfortable returning to public spaces after the pandemic, and cafés could face continued tough trading even after restrictions are eased.

“Unless you have something pretty compelling to offer these are scary times. We can’t tell how far normality is away and what the new normal will look like. As much as we might pin our hopes on having a vaccine, we’re 18 years into having SARS in the world and there’s still no vaccine,” says Square Mile’s Hoffmann.

Out of the frying pan…

With the prospect of a global recession looming, the majority of café owners surveyed by Allegra’s café impact Survey do not anticipate a swift return to normality. In May 2020 just 3% expected normal operations to resume within 1-3 months. The majority, 29%, forecast a full recovery could take up to two years. UK consumers are not banking on business-as-usual either – 86% surveyed believe the pandemic will fundamentally alter business operations in the future.

“Operators will by buoyed by news that visiting cafés and coffee shops is one of the main social activities the UK public has missed the most during lockdown”
– Bradley Journeaux, Research Manager, World Coffee Portal 
Even as businesses reopen customers could be slow to return. In May 2020, polling firm GfK reported its UK consumer confidence index had slipped to -36, not far off the all-time-low of -39 recorded at the height of the financial crisis in July 2008. Consumer debt could also impact spending power, with debt advice charity StepChange highlighting UK households are expected to have incurred an additional £6bn of debt during lockdown.

“Short-term, I am very concerned about the financial state that some of our clients will emerge in,” says Lavazza’s Rogers. “Businesses in metropolitan areas, with high rents and operation costs, face an uncertain level of business to restart with. Another big concern for us is that with many coffee machines inactive for 2-3 months, there is a risk that there will be a drop in coffee quality. We are providing technical assistance to all our out-of-home customers who are supplied directly by Lavazza to ensure coffee is served to the same high standard once premises reopen.”

Nevertheless, there are clear signs many British consumers are eager to start spending again. Allegra’s UK public impact survey revealed that after family and friends, visiting  cafés and coffee shops were the social outings the UK public missed most during lockdown. In a further sign that trading could rapidly improve as restrictions are eased, analyst firm Springboard recorded a 50% week-on-week footfall increase across all UK retail locations when non-essential shops were allowed to reopen on 15 June 2020 – albeit down 34% on the previous year.

“Operators will by buoyed by news that visiting cafés and coffee shops is one of the main social activities the UK public has missed the most during lockdown. As restrictions begin to be lifted, the demand for coffee out-of-home will recover. How quickly depends on how effectively existing properties can be repurposed for take-away use, and how viable it is for companies to implement social distancing measures,” says Bradley Journeaux, who led Allegra’s coronavirus research.

Staying sustainable

While much of Covid-19’s impact on coffee shops has focused on consumer markets, the impact on coffee growing communities could have huge ramifications. Price rises and supply disruption are a major concern for Lavazza’s Rogers, who urges operators to continue honouring their sustainability obligations to ensure the coffee industry’s long-term prosperity.

“Covid-19 is going to have a significant, but as yet unknown, impact on global coffee supply. We know there is currently plenty of raw material but we don’t know how well the supply chain is going to hold up as the epicentre of the pandemic moves to the Americas, particularly Brazil. Coffee businesses could face some big issues because of this,” says Rogers.

Allegra data shows coffee shops will be wise to resist scaling back sustainability efforts. In February 2020, nearly three-quarters of consumers surveyed agreed it was important that coffee shops are as transparent as possible regarding their coffee sourcing practices. Only a tiny proportion of industry leaders surveyed for Allegra’s café impact survey expect consumers to reduce focus on sustainability after the pandemic.

In fact, a move towards a more sustainable society was consistently cited by members of the UK public surveyed in Allegra’s UK public impact survey as one of the potential upsides of the pandemic, with the benefits of reduced air pollution drawing particular focus.

“Sadly, in consuming countries there will be redundancies and store closures because of Covid-19, but for the long term it is very important that the coffee industry looks after coffee farmers in producing countries. Lavazza feels a deep sense of responsibility towards the communities in which it operates and supporting local farmers has always been at the core of the brand,” says Lavazza’s Rogers.

A fighting chance

As the world emerges from the pandemic, coffee businesses everywhere face an uncertain future. But even in a post-Covid-19 world, the unique ability of coffee to connect people from all walks of life remains its strongest asset.

“We’ve traded through the dot-com bubble, the 2008 financial crash, neither of which severely affected coffee because it has always been considered an affordable luxury. I hope that will be the case with the current crisis,” says Rogers.

“For coffee shops, putting variety on the menu board is a great opportunity to drive traffic again and create value”
– David Jiscoot, ​ Alpro UK Marketing Director
Allegra data confirms a strong desire among the UK public to return to coffee shops, but the industry must adapt to serve customers in a radically changed retail environment. Covid-19 has lit a fire under any sense of complacency and accelerated the pace of UK café development – particularly across convenience, digital integration and at-home coffee consumption. As Alpro UK Marketing Director David Jiscoot points out, crisis can lead to great innovation, and UK cafés must seize opportunities in the new market landscape.

“The strong growth of recipe trends like Dalgona and plant-based coffee during Covid-19 shows the massive appetite for coffee innovations, now more than ever. For coffee shops, putting variety on the menu board is a great opportunity to drive traffic again and create value,” he says.

In order to keep up with rapid pace of change, coffee shops must invest in technology, foster localness, and tirelessly champion quality with a professional and progressive mindset. Those able to do so will be best placed to navigate this unsettling chapter and lead the UK café industry into a new era of prosperity.

This article was first published in Issue 4 of 5THWAVE magazine.